Yesterday Oregon voters delivered a huge victory for progressives by approving Measures 66 and 67, raising taxes on incomes over $250,000 and large corporations to generate $733 million to close the state’s budget deficit. The Oregon legislature had approved the taxes last summer, but a corporate/teabagger alliance organized to put it to voters in a referendum.

One wonders if the national media will cover this victory at all – much less at the levels of the Massachusetts Senate race. Although they’ll almost certainly ignore it, the lessons for California are enormous and extremely important.

The opposition ran a well-funded campaign, led by Nike, Columbia Sportswear, and other big businesses. They were joined by Ari Fleischer’s FreedomWorks and the libertarian publisher of the Oregonian, who used to be at the Orange County Register before it went belly-up. Together they ran a campaign arguing that the tax increases would worsen unemployment. But 55% of voters have rejected that, and instead showed that when a truly progressive campaign is waged, the right-wingers can be beaten. Even on taxes.

What it also shows is that progressive policies, supported by smart progressive organizing led by folks such as former US Senate candidate Steve Novick and the Oregon Bus Project, which reached out to younger voters and had a strong ground game, can beat well-funded, well-organized corporate/teabagger alliances.

Their message was deeply progressive:

These reforms protect nearly $1 billion in vital services like education, health care and public safety. These funds preserve class sizes, save jobs for teachers, provide seniors with in-home care, and provide health care for thousands of Oregonians through the Oregon Health Plan. In this time of economic crisis, we must protect those who have been hit the hardest – seniors, children and the unemployed – without putting more of a burden on the middle class.

It’s a message that works nationally.

Indeed, it does. If Democrats asked themselves every time they propose legislation, “Does this help or hurt people who make between $30,000-$100,000”, they can win. Note:

Tuesday’s strong support also validated a strategy by Democratic lawmakers to single out the rich and corporations for targeted tax increases.

Campaign ads by supporters highlighted banks and credit card companies and showed images of well-dressed people stepping off private jets. They also hammered on the $10 minimum tax that most corporations have paid since its inception in 1931.

Those messages helped counter warnings by opponents that the taxes would lead to job losses, worsening the state’s 11 percent unemployment rate, and prompt wealthy residents to move elsewhere.

“They did a great job of pounding, ‘It’s only $10,'” said Bob Tiernan, chairman of the state Republican Party.

Meanwhile the Oregon bidness community is very upset:

“It’s disappointing and discouraging,” said Pat McCormick, spokesman for Oregonians Against Job-Killing Taxes. “The tone and tenor was often venomous, trying to pit the haves against the have-nots.”

As opposed to shrieking, “Give me tax breaks, or the economy will die! BOOGA!! BOOGA!! BOOGA!!” That, on the other hand, is quite civil. And for comic relief that will make your irony meter explode:

He said the business community now must figure out “how to participate in a system that’s largely disconnected from us.”

Because families in the second to fourth fifths of the income distribution are so well connected. There have been so many programs to help their wages increase, provide truly affordable healthcare security, and keep jobs in the U.S. over the last quarter century. Surely, federal and state governments are just humongous rackets for middle-class people.

Snark aside, it just demonstrates, as I often say on this blog, people have to actually like this crap. Given the choice of taxing a rich guy, who profited by the fruits of their labor, or cutting services they need, enough people will vote for their own self-interest (enlightened or immediate).

Of course, since this doesn’t fit with the traditional media narrative that ‘Real Americans’ never want to raise any taxes, just cut them, this development will no doubt disappear into the memory hole….

Comments

I often see reasoning about the Democrats stupidity on the blogosphere go in a direction diametrically opposed to the correct one. It usually goes that the higher-ups in the Democratic Party really just care about winning and ignore developments like this because they’re stupid or overly influenced by some nebulous “Beltway conventional wisdom.” The reality is the opposite, the higher-ups in the Democratic party ignore developments like because their policy vision is considerably to the right of their voting base and, indeed, the country as a whole. It makes developments like this not irrelevant in their minds, but inconvenient.

1% of the population pays for 40% of the taxes. 50% of the population (moochers) pay less than 3% of federal taxes. I’m a member of the 1%. What are you going to do when we all leave? Me and my fellow producers are actively seeking ways to get the hell out of the US. Who wants to be on a sinking ship filled with moochers? You can only live so long at the expense of your neighbor… sooner or later, we’ll move.

Bob @2. Where are you going to move to? Either you go to another first-world country where you will find universal health care and other such socialist horrors, or you go to some third-world country with universal poverty and no infra-structure to support your production.

Not at all…. Singapore has a progressive tax system which tops out at a much more reasonable 20% w/ a very high standard of living and first class healthcare. Hong Kong has even lower rates w/ a first class infrastructure. Also, there are no death taxes in these two countries (along with many others in Asia); indeed, the very idea of a death tax is anathema to their denizens. Furthermore, the US is the only first world country that taxes citizens based on citizenship (the other is Eritrea… great company we have there) so that you pay taxes to the motherland even if you don’t live there (or haven’t lived there in decades). Because many other first world countries don’t have this system, you can minimize your taxes with a variety of other strategies. For example, Canada doesn’t tax its citizens on income earned outside of Canada. You could be a citizen of Canada while operate a business in a low tax country, thus minimizing taxes. This is just the tip of the iceberg and there are many other strategies that are available. Also, I would strongly disagree with your comment that third world countries have no ability to support production. As long as you have a government that supports property rights, entrepreneurs will come to seek their fortune. I have personally done this in countries people in the US would consider “third world”. Indeed, the activities of my partners and I have done more to lift the locals we hire OUT of poverty than any thing their own government has done.
The bottom line is that I personally work around 100 hours a week to make my endeavors a success. If you divided how much I make by my hours invested, it would be comparable to many of the moochers who work 1/3 of the time I do. Indeed, when I first started, I was earning less than minimum wage living on ramen noodles. Yet even though I sacrifice my time (and health), I am taxed effectively at twice if not three times the rate of those who are less productive, many of which are essentially moochers as they pay nothing into the system yet receive all the rewards of a first class nation. This clearly is unsustainable, and in a global economy where one can be on the other side of the world in less than 24 hours, there is nothing holding producers back from throwing in the towel and moving to more friendly regions. Indeed, the very idea of America which attracted millions of productive immigrants to the country to seek their fortunes has been replaced by an entitlement society. Eventually, the producers will once again migrate to a new home. A wise person doesn’t allow oneself to be limited by an accident of birth (where they are born); there is a whole beautiful world out there to be explored. And for an entrepreneurial minded person, there are many, many better places than the US to set up shop. This is particularly true given that we are completely bankrupt with debts we have no hope of ever repaying… but that’s another story.

eNeMeE, please show me an example where someone is forced to work against their own free will? It doesn’t happen in the US (well, actually it does to a limited extent, but it is illegal). For the vast majority of Americans, the only work that takes place is that which is done by the consent of the laborer. And futhermore, you won’t revolt… you’re too scared of failure and living off ramen noodles and working 100 hour weeks. If you weren’t, you would have revolted by quitting your job and starting your own business (or even living a simpler, cheaper life… I myself have easily lived off annual earnings which would be considered poverty). This, of course, is a risky proposition with no promise of success (and if you are successful, you are taxed to death at least in the US and Europe). So no, you won’t revolt… you are content with being someone else’s laborer, which is, of course, your own choice of your own free will.

The bottom line is that I personally work around 100 hours a week to make my endeavors a success. If you divided how much I make by my hours invested, it would be comparable to many of the moochers who work 1/3 of the time I do. Indeed, when I first started, I was earning less than minimum wage living on ramen noodles.

This describes a lot of people who aren’t in the top 1% of earners. I did the long hours at a start up sleeping in my chair and pushed a lot of projects out the door with crazy hours. It paid off and it felt good, but I was never under the illusion that I was the only person who worked hard or that everybody who works long hours gets paid a lot.

Yet even though I sacrifice my time (and health), I am taxed effectively at twice if not three times the rate of those who are less productive, many of which are essentially moochers as they pay nothing into the system yet receive all the rewards of a first class nation.

Interesting. During my time in the top 1-2% of household earners, I wasn’t thinking, “Gee, if only I had a job that paid badly enough that I could avoid federal income taxes. I’d be way better off.” As I recall, it was actually a pretty pleasant way to live. Something about the diminishing marginal utility of money.

This clearly is unsustainable, and in a global economy where one can be on the other side of the world in less than 24 hours, there is nothing holding producers back from throwing in the towel and moving to more friendly regions.

That will be very interesting indeed. You can take up some of the spaces vacated by entrepreneurs from those countries who are headed over here to set up shop.

Of course, one wonders why this didn’t happen over the majority of the last century when top marginal rates were far higher than they have been over the past twenty years.

This is particularly true given that we are completely bankrupt with debts we have no hope of ever repaying… but that’s another story.

That’s an interesting take on the fact that our debt to GDP ratio is still below its historic peak (unless, of course, you want to add in private household debt and leverage in private industry).

I think that a lot of this rhetoric stems from people extrapolating beyond what is reasonable. Yes, increasing taxes by one percentage point per year will eventually lead you to 100% taxation. No, that’s never going to happen, so it’s not really a useful thought experiment. The reality is that there will always be minor adjustments to the top marginal rates simply because that’s the place where people are least sensitive to taxation, and that insensitivity makes a disaster scenario where the educated and skilled suddenly leave for greener pastures pretty unlikely.

“Not at all…. Singapore has a progressive tax system which tops out at a much more reasonable 20% w/ a very high standard of living and first class healthcare. Hong Kong has even lower rates w/ a first class infrastructure.”

And both of them balance out the gap in revenue by levying huge consumption taxes on imported goods. OMFG THOSE ANTI-FREE TRADE SCUMBAGS!

“That will be very interesting indeed. You can take up some of the spaces vacated by entrepreneurs from those countries who are headed over here to set up shop.
Of course, one wonders why this didn’t happen over the majority of the last century when top marginal rates were far higher than they have been over the past twenty years.”

There was an interesting article in NY Times a couple of years ago about Indian immigrants moving back to India to start new businesses due to more opportunity back home. I’m convinced this will continue to be true as the rest of the world catches up to our standard of living… why leave your own country when you can have a better life in you homeland surrouned by family and friends? Also, there are a couple of reasons this didn’t happen over the last century when there were much higher marginal rates: 1. Many of today’s emerging countries were awful places to live with inadequate infrastructure and/or oppressive regimens so that the US was the only place to be if you were a self-starter; we had a monopoly on an atmosphere of innovation. This is becoming less true as the middle class explodes, particularly in the East. 2. Even though marginal tax rates were sky high, the effective tax rate was much lower as there were many more loop holes to avoid taxes, the majority of which have now been closed. 3. The world wasn’t as interconnected and people are reluctant to leave friends and family behind… this is a non-issue in today’s world.

“That’s an interesting take on the fact that our debt to GDP ratio is still below its historic peak (unless, of course, you want to add in private household debt and leverage in private industry).”

This would take a lot longer to explain but very briefly: 1. GDP (at least the way it is calculated today) is not a helpful way to measure true economic output and development of wealth. I would argue it does not give an accurate picture of the economic health of a country (for example it includes “services” which do not build wealth as well as government spending which also doesn’t contribute to wealth creation… the US’s GDP is greatly influenced by these two non-wealth producing factors). 2. The official government debt is a complete fabrication in that it doesn’t take into account future obligations such as SS or medicare. If companies reported their finances in a similar fashion as the government, they would all be prosecuted; the government gets to cheat. If its true debt and obligations were tabulated, it would be something on the order of 63 trillion. The only way to pay this off (the government is highly unlikely to reduce entitlement spending) is to continue the fed’s insidious policy of inflation (and more recently, quantitative easing), which of course punishes savers more and particularly hurts the middle class. And once the rest of the world stops buying our funny paper and/or we loose our reserve currency status, we are truly hosed with either sky high interest rates and/or hyperinflation. The US hasn’t had real economic growth in 30+ years… we’ve simply had phony-wealth bubbles which have subsequently been pricked. The average citizen has been spending his entire paycheck to keep up with the Joneses while our Eastern friends have been saving 25% of theirs (even though they make substantially less than us). Throughout history the seat of power and prosperity has continually shifted; it will continue to do so and in today’s world, the producers will go to where they have the most opportunity.

Tyler, first of all Hong Kong does NOT have a consumption tax on imports other than cars. If you don’t import a car or only import one every 10 years or so, the tax is non-existent or neglible. Indeed, there is no reason to have a car in Hong Kong so you could completely avoid this tax altogether. Secondly, I wouldn’t call Singapore’s 7% a “huge” consumption tax. Combined with the highest income tax of 20%, at the very most, you would be paying 27% of your income in taxes (assuming you spent 100% of your income on covered goods, which of course you wouldn’t). Indeed, 7% is below the sales tax of many states/cities. Furthermore, their consumption tax doesn’t even apply to essential services (food, water, etc.) so again your effective tax rate is much lower. They balance out the gap by not having a gap in the first place; they live within their means and promote a culture where people save and thus create wealth.

Given that we can extract from Bob’s claims the conclusion that the top 1% only makes three times the median income, I am forced to assume Bob is either a liar or completely unaware of how much the top 1% actually make – which would put him in good company with the 20% of people who think they’re in the top 1%. (Hint, Bob, if you make three times what the “moochers” do, you’re making less than 100k/year, which would put you somewhere less than the top 10%, although above the top 25%. So are you lying when you claim the “moochers” just aren’t working long enough, or are you lying or wrong when you claim you’re in the top 1%?)

When Atlas imagined Shrugging, he saw the world topple. But when he actually shrugged, another was quickly there to hold it in place. He was just too arrogant and self-absorbed to see the others around him.

I also am in the top 1%. I once had Bob’s Atlas Shrugged Ayn Rand philosophy. Unfortunately, it’s an immature version of reality that doesn’t fit with evidence.

…the higher-ups in the Democratic party ignore developments like because their policy vision is considerably to the right of their voting base and, indeed, the country as a whole.

To the right of their voting base? A little bit, perhaps. But to the right of the country as a whole? Hardly. It is true that both parties are more in the pockets of various special interests and an overwhelming majority of Americans dislike that. So, to the extent that even the Democratic Party leadership serves corporate interests more than the interests of the country as a whole, that is true. But they are to the left on many other issues.

Kurt, I would have to disagree with your statement. What happened when New York instituted wealth taxes? Their wealthy moved to Florida and made damn sure to stay below the limit of days in New York and not be counted a resident. New York is bleeding red and no one is there to “hold them up”. When Maryland instituted their millionaire tax, their revenue collected from millionaires promptly fell. Why is Texas being invaded with Californians… it’s because companies are moving from a high tax state to low tax state and high cost of living to low cost of living (there was a great article in the times about this). Again, California is awash in red ink and it will be interesting to see how they get out of their mess without completely defaulting. This is reality and does “fit with the evidence”. You can squeeze your productive class for a while (and perhaps for a long while) but eventually they’ll move, stop working, or do any number of things to reduce their enslavement (that’s what we’re talking about here… when the fruits of ones labor goes to someone else, they are essentially a slave). People and companies respond to incentives. I would call a policy of non-aggression and consent between involved parties the only moral system there is and hardly “immature”. Unfortunately, there is almost no one in Congress who thinks their citizens shouldn’t live under the gun.

Tyler, While I will agree that taxing imports is less than ideal, almost every country artificially affects prices in some way or another which has the net result of an import tax. In the US, we spend billions of dollars on “farm aid” which is essentially an import tax on poorer farmers in other countries who could sell us cheaper (and probably healthier) food. The same is true for the ridiculous amount of money we spend on the military. So while many countries many not have an official import tax, they use domestic programs to achieve a similar result. And 7% is clearly not “huge”. In any case, I’m in favor of a consumption tax, it would be good for building true wealth, it is moral as it is non-compulsory, and it would cut down on our corrosive culture of consumption and waste (among many other things).

Michael, perhaps I should clarify my statements. First of all, the median income is slightly over 50K so three times this puts you into the top 5% of wage earners, not less than 10% as you suggest. Secondly, I never defined what a “moocher” is. Given that 70% of the taxes are paid by 10% of the population, you could argue that those outside of the top 10% are moochers given they aren’t paying for the majority of the society they enjoy. The cut off for the top 10% is around 115K, so three times this will put you in the top 1%. In any case, this isn’t the point. My point is that the government continues to expand and impose costly nonsensical regulations. Their lust for power and control is insatiable. People will always vote for whoever promises them the most “stuff”. At some point, the providers of stuff will have enough and either stop working so hard or move away. You can get away with mob rule for a while, but in the long run, it won’t work.

Ok, and the total purchasing power of singaporean and hong kong consumers put together, compared to american (or european) consumers is what exactly?

Right, a drop in the bucket. You don’t just have to produce stuff – somebody needs to buy it as well or you won’t be making money. If you hadn’t noticed Bob, our current recession was caused by a collapse of demand, not supply.

Of course if the destruction of the lower classes progresses further their purchasing power will be further lowered and ultimately even the rich fat cats at the top will suffer. It is too bad that they are apparently too stupid to realize this, unlike the successful capitalists of previous times.

Coriolis, Actually our current recession is the fault of the fed for artificially increasing demand beyond reason. So sure demand collapsed but that’s because prices were completely unsustainable. Large portions of the economy were running under the “bigger sucker” rules… eventually, the music stops and someone is left holding the bag. Of course, this wouldn’t happen without the fed manipulating interest rates to encourage wreckless investment. Or mandates from oh-so-wise Congress forcing businesses to lend to less than loan worthy individuals in their myopic quest to ensure everyone is a homeowner (never mind if it is good policy or not). That being said I agree with you on your second point. We are not a capitalist society; we are a corporatist society which is as bad as the entitlement state. Indeed, our so-called “capitalists” fix the system with their buddies in power to eliminate competition and thus ensure they stay on top. They advocate for certain regulations to ensure the means required to enter a market is prohibitively high. This is just as bad and will also lead to ultimate decline as motivated producers find they can’t compete due to what I would call certainly “fat cats” fixing the game.

WcT… love it. And I am leaving but probably not for Singapore… I was just using it as an example. I have lived for a while in the East and will probably end up their eventually as they will become the seat of power in my lifetime. But there are other adventures to be had before then.

Ok this shouldn’t be that hard to understand – if the whole reason for this recession is that bankers made bad loans to poor people who wanted to buy residential housing then why has commercial real estate imploded even more then residential?

Was the government forcing banks into giving stupid loans to evil black business owners as well?

The fact is that if ordinary people hadn’t gone massively into debt, they wouldn’t have consumed nearly as much and our economy wouldn’t have grown even at the pathetic pace that it did. The real solution would have been for those people to have sufficient salaries so that they could both spend enough to buy all the stuff that was being produced (and hence grow the economy) and not run into huge debt (and hence not have this crash).

And good luck to you in China. They will probably do OK, but just remember that not too long ago there were similiar predictions of the unstoppable rise of Japan. I don’t seem to hear much about that anymore. Oh and last I heard, in Singapore you cannot chew gum in the subway after some guy caused a crash by spitting out his gum. Enjoy the freedom.

This would take a lot longer to explain but very briefly: 1. GDP (at least the way it is calculated today) is not a helpful way to measure true economic output and development of wealth. I would argue it does not give an accurate picture of the economic health of a country (for example it includes “services” which do not build wealth as well as government spending which also doesn’t contribute to wealth creation… the US’s GDP is greatly influenced by these two non-wealth producing factors).

I’m starting to hear very familiar rumblings. I had to skim ahead and look for the word “slavery.” Yup, there it is. I was surprised to note that the word “coercion” isn’t here yet, but I’m sure it will show up.

1) If it’s sellable in dollars, it’s a good measure of one thing: Our ability to pay back debt we owe in dollars. It may not be a perfect measure of our standard of living or industrial base, but that’s not what we’re talking about here.

2) I know a lot of software engineers who would be surprised to note that their non-manufacturing work does not contribute to our national wealth. There are probably a lot of defense communications engineers who would feel the same way.

The official government debt is a complete fabrication in that it doesn’t take into account future obligations such as SS or medicare.

Yes, if you redefine debt from, “Money we have borrowed and must pay back,” to, “Money we may borrow in the future,” then our debt is huge. Likewise, if you redefine “debt” to, “the number of grains of sand on all the beaches in the world,” then our debit is totally unmanageable. It’s abundantly clear that we can’t continue handling health care cost the way we do now, and we’re going to have to tackle that problem. That’s not the same as being in debt, though.

The US hasn’t had real economic growth in 30+ years… we’ve simply had phony-wealth bubbles which have subsequently been pricked.

Aside from the fact that we’ve built a technological infrastructure the likes of which humankind has never seen over the past 30 years that has enormously increased our standard of living, I will say that there is a grain of truth to this. I just see that grain of truth differently. Take a look at the share of income growth as it has been distributed across earnings quintiles. When you decry “fake” earnings from bubbles and services that have driven our economy over the past 30 years and then look at where that growth went, I don’t think that your position on phony wealth jibes very well with your position on the top 1% being the only “real” productive sector in the economy.

The median household income is that, the per-worker median income is only slightly above 30k. But your statements were about individuals, not about households, so again: Your statements are not true. And you’re still not in the top 1% unless you were lying about how much you make relative to the median.

Secondly, I never defined what a “moocher” is.

50% of the population (moochers) pay less than 3% of federal taxes.

Whoops, that sure does look like a definition to me.

And it doesn’t matter what your point is, when you are making untrue assertions in the apparent hope that nobody will call you on your lies, which completely ruins the credibility of the rest of your claims. (ps: if you’re /really/ working 100 hours/week, how do you have time to post on a blog? Or was that a lie too…?)

Also, your claims about how much of the taxes are paid by the top N% would be a lot more convincing if you were at least attempting to be honest and showing how that compares to how much of the wealth they have. But of course, then they’d be a lot less convincing because they’re paying a reasonable amount of taxes for their amount of wealth …

Michael, you are being incredibly nit-picky over my words. I’m not lying about anything; perhaps I should add qualifiers to each and everyone of my statements to satisfy you. There is a difference between lying and not being specific. I never specified individual or household income above; however, data concerning income tax burden by income is not (as far as I know) broken down further into combined or individual returns; thus, using median household income is perfectly fine for the purposes of my argument. Furthermore, calling 50% of people who pay less than 3% into the system as moochers doesn’t exclude others as I described above… as far I as know, there is no technical definition of “moocher”. You are avoiding the real points of my argument which are as follows:
1. In general, people who make a lot (in terms of earned income, not the super rich who only pay 15% on capital gains) work their ass off. Clearly they place a high priority on money over leisure otherwise they wouldn’t work so hard.
2. The US government relies on 1% of the population for 40% of its income and the top 10% for 70% of its income. Is this smart or reasonable? Furthermore, their reliance on the top 1% has increased over the past decade and will likely continue to do so as government grows in size and gains more power (is their any limit to its lust for power and control). What happens if the one percent stop working or move away? It has already happened with individuals in the past (for example John Templeton), and American companies have re-incorporated overseas to avoid taxes. As globalism continues to expand, this will surely increase. As I said, I already know many people who are starting businesses overseas and/or expatriating to avoid the weighty hand of big brother.
3. The very idea of a tax to work is immoral and unreasonable.
4. Money will go to where it is best treated. As the rest of the world catches up to the standards of the US, entrepeneurs will be less resistant to the idea of leaving.

How am I not being honest? You disagree with my claim that 1% pay 40% of taxes, or 10% pay 70%? These aren’t up for dispute; these are FACTS as reported by the IRS. Also, I do not know of data that shows how much taxes are paid by different wealth levels. I would be interested to read such data if you could point me to it. In any event, it isn’t relevant to my argument which concerns people who are productive and people who have wealth (which aren’t necessarily the same thing).

Also, if you want to join me for work, please let me know. Be aware though, there are times when I work 30+ hours straight without stopping to do more than use the restroom.

The US government relies on 1% of the population for 40% of its income and the top 10% for 70% of its income. Is this smart or reasonable?

As of 2007, the top 10% took in about half of the national income. Given the shape of US income distribution and the fact that the marginal utility of money diminishes just like everything else, those numbers don’t seem all that ridiculous. The fact that the tax burden is skewing more and more can be attributed largely to the fact that the top income brackets are walking away with a larger and larger percentage of national income. This also partially explains why the super rich in general aren’t leaving. Their tax burden concentration is increasing, but their income concentration is increasing faster.

Again, you made the point earlier that our growth over the past 30 years has been “phony” rather than an indication of real increases in output. Given that the top 1% of incomes received the vast majority of that growth, how do you reconcile that with the position that the top 1% are the productive ones who are driving real growth and the bottom half are the moochers? I’m certainly not of the position that the top 1% are robber barons who don’t work. I’m just not buying into the notion that, say, the top 0.1% are really responsible for 6% of our national productivity and we’d be lost if they took their greatness elsewhere. I would include John Templeton in that.